Jack Townsend offers this blog on Federal Tax Crimes principally for tax professionals and tax students. It is not directed to lay readers -- such as persons who are potentially subject to U.S. civil and criminal tax or related consequences. LAY READERS SHOULD READ THE PAGE IN THE RIGHT HAND COLUMN TITLE "INTENDED AUDIENCE FOR BLOG; CAUTIONARY NOTE TO LAY READERS." Thank you.

Kevin Downing, an attorney in the DOJ's Tax Division, said that under 18 U.S.C. 3506, individuals must provide the U.S. attorney general with notice if they challenge a U.S. request for evidence from a foreign government or agency.

Downing, who spoke at the 34th annual Federal Bar Association Section on Taxation Tax Law Conference in Washington, said that attorneys who represent clients in these matters without filing with the DOJ a copy of their opposition motion will be referred to the IRS Office of Professional Responsibility. There is no Fifth Amendment right not to comply with the statute, as filing with a foreign court waives that right, Downing said.

Two referrals for not filing copies with the government have already been made, he said.

Downing emphatically warned taxpayers who think they can use the voluntary disclosure program if their court challenges fail that the DOJ will not honor that disclosure. He added that he hopes Congress will enact penalties to provide greater enforcement of the provision.
Downing said some taxpayers who have yet to come clean are continuing to engage in felonious behavior by filing false returns not listing foreign accounts or by failing to file foreign bank account reports. The "treasure trove" of information the government has received on foreign professionals as a result of pursuing more banks means the DOJ will be able to bring 100 to 200 criminal cases a year for a long time, he said.

The United States is using tools other than treaty requests and the voluntary disclosure program to gather more information on offshore tax evasion, Downing said. For example, the IRS whistleblower program is proving useful, he said, and there is no prohibition on the U.S. government using account information it did not directly procure from a foreign bank.

All of the comments ascribed to Mr. Downing are quite interesting, but I do call specifically to the attention of the readers the assertion that "DOJ will be able to bring 100 to 200 criminal cases a year for a long time." Practitioners have speculated for some time about what level of criminal enfrocement the Government could really pursue, given limited systemic resources (including investigative (whether IRS or grand jury), court, probation office and bureau of prisions resourece). Apparently, 100 to 200 is about it, and is consistent (within a range) with the speculations I have heard and even made myself. One could further speculate that the Government will pick only the more egregious cases to focus its criminal angst upon (although there might have to be smattering of the less egregious cases to send the message that taxpayers don't get a pass simply by being not as bad as the really bad guys).

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